Gross reserves slip to 4-month low

The country’s gross international reserves (GIR) slipped in September from August and from a year earlier due mainly to revaluation of the central bank’s gold and other foreign currency reserves, and the cost of maturing government foreign debt, the central bank said on Tuesday.

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Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) said the GIR level at end-September stood at $80.43 billion, down by $44 million from the previous month and by $3.07 billion from the year-earlier level.

BSP’s latest statistics show the September level was the lowest since May this year.

GIR refers to foreign assets that are readily available to and controlled by the central bank for direct financing of payments imbalances. It consists of holdings of gold, special drawing rights, foreign investments, and foreign exchange. Higher reserves provide monetary authorities with some flexibility in managing both the exchange rate of the peso and domestic inflation.

According to the central bank, the latest GIR level provides a buffer of 10.9 months’ worth of imports of goods and payments of services and income.

This compares with an 11-month import cover in August.

“It is also equivalent to 8.4 times the country’s short-term external debt based on original maturity and 6.1 times based on residual maturity,” the BSP said in a statement.

“These outflows were partially offset by the foreign exchange operations of the BSP, net foreign currency deposits by the Treasurer of the Philippines, and income from the BSP’s investments abroad,” it said.

Weaker peso
Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, said the GIR decline recorded in September may be attributed to the weakening of the peso during the month.

“With the peso weakening in September, we saw the GIR dipping to a four-month low,” he said.

The economist explained that the peso showed a slight depreciation trend, with its value against the dollar averaging P44.132, compared with the P43.774 level seen in August, suggesting the presence of the central bank in the exchange market.

“The BSP has a bevy of reserves to use to defend the peso from sharp swings given the GIR levels but any surge in either direction will result in a drawdown or buildup in its GIR level,” Mapa said.

The BSP had revised downward its earlier projection for full-year GIR to $85.3 billion from $88 billion after it cut its balance of payments projection for this year to just $1 billion.